Taiex to challenge 10,000 points in 2019 on low valuations: analyst

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Taipei, The weighted index on the Taiwan Stock Exchange, the Taiex, is expected to challenge 10,000 points again in 2019 because of low valuations after the heavy losses incurred in 2018, an analyst said Tuesday.

Taiwan's stock market will be open for trading for the first time in 2019 on Wednesday, and Bevan Yeh a fund manager at Prudential Financial Securities Investment Trust Enterprise Co., said the downturn in the fourth quarter of 2018 has created buying opportunities.

In a statement, Yeh said bargain hunting could emerge in 2019 to push up the Taiex, and the rebound is expected to help the market challenge 10,000 points again. It closed down 915 points, or 8.6 percent, at 9,727.41 in 2018.

The Taiex remained above the 10,000-point mark for most of last year before plummeting in October, when trade tensions between the United States and China and interest rate hikes by the U.S. Federal Reserve struck the nerves of investors around the world.

On Oct. 11, the Taiex closed below the 10,000-point level for the first time since May 2017, falling 660 points to end at 9,806.11. In October alone, the index fell 1,204 points.

Since Oct. 11, the Taiex has closed above 10,000 points only three times, on Oct. 12, Dec. 3 and Dec. 4.

Yeh said that after the losses in the fourth quarter, the price to earnings ratio (PE ratio) on the Taiwan Stock Exchange is 12.7, lower than the average of 14.2 over the previous five years, reflecting potentially low valuations that could attract bargain hunters.

The market's high average dividend yield should also lend support to the Taiex and lead the index higher after the recent consolidation, Yeh said.

According to Yeh, the market's average dividend yield is currently around 4.6 percent, higher than in other regional markets, and it reflects the sound finances of the companies listed in Taiwan.

Looking at his top picks for the new year, Yeh said he would choose high-tech stocks related to 5G, automotive electronics, artificial intelligence and internet of things technologies.

He is also paying close attention to suppliers of non-tech consumer goods such as bicycles and sports shoes.

In addition to 5G applications, Chen Ssu-ming manager of the FSITC Small Cap Fund, said in a research note that he is focused on companies producing silicon wafers because of the tight supply in the market.

He also recommended suppliers of electronics components, such as communications ICs, power management devices, sensors, smartphone camera lenses and flexible printed circuit boards.

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